China’s ByteDance may very well be compelled to promote TikTok U.S., however its quiet lead in AI will assist it survive

“I discovered my TikTok life once I turned a single mother or father…I needed to discover methods to help my son,” Ryssi Avila, a Filipino singer who went viral on TikTok, instructed the assembled delegates. “TikTok made all the pieces simpler…It turned a lifeline.”

But the actual motion involving TikTok was going down 50 miles to the south, in Busan, the place U.S. President Donald Trump and Chinese language President Xi Jinping had been locked in discussions over the way forward for U.S.-China commerce— and, doubtlessly, the destiny of TikTok’s U.S. operations. 

For years, U.S. officers have warned that TikTok’s Chinese language possession provides Beijing entry to U.S. consumer knowledge and the ability to meddle in U.S. affairs by tweaking the social media platform’s algorithms. Such worries led Congress to cross final 12 months’s so-called divestor-ban regulation, which threatens as well TikTok from U.S. app shops except its proprietor, ByteDance, sells the app. 

In September, U.S. officers introduced {that a} consortium of American buyers might be taking up TikTok’s U.S. arm, saving the app’s U.S. operations. Quickly after Xi and Trump’s assembly, Treasury Secretary Scott Bessent mentioned that China had endorsed the plan. (Beijing provided a extra tepid response, saying it would work with Washington to “correctly resolve” points associated to the app.) 

The Trump administration has touted the TikTok deal as a win for Zhang Yiming and pal Liang Rubo rented an condominium in Zhongguancun, a techy neighborhood in Beijing, and launched Toutiao, successful information aggregator. However ByteDance turned the worldwide tech behemoth it’s at present when it launched Douyin, a short-form video platform, in 2016, and TikTok, Douyin’s worldwide sister app, a 12 months later. 

TikTok now boasts over 1.5 billion month-to-month lively customers worldwide. ByteDance’s fortunes swelled with it, reaching a $400 billion valuation, making it, at one level, the world’s most respected startup. 

Now, ByteDance is considering its subsequent massive play: AI. It debuted its Doubao chatbot in August 2023. It arrived 10 months after ChatGPT’s launch and resembles OpenAI’s major providing in that it could reply questions, conduct searches, and generate photos and video. (ByteDance affords entry to its AI fashions to different enterprises by way of its Volcano Engine platform.) With 157 million month-to-month lively customers, Doubao is China’s most-used AI app. In October, a ByteDance government mentioned the typical functions and enterprise adoption of AI,” says Tony Peng, who writes about China’s AI sector.

If all sides approve the TikTok U.S. sale, a U.S.-based three way partnership will take over TikTok’s U.S. operations, possible earlier than a Jan. 23 deadline. ByteDance will keep a lower than 20% stake within the new firm; the remaining share reportedly might be cut up amongst ByteDance’s present U.S. buyers—like enterprise agency Normal Atlantic—and new entrants, corresponding to Oracle and Silver Lake Administration. 

Vice President JD Vance has claimed that TikTok’s algorithm might be “American-operated” and that the app’s U.S. arm might be bought for a comparatively paltry $14 billion. However latest media studies counsel that the algorithm will stay ByteDance-owned, and the brand new TikTok U.S. might pay a hefty licensing charge—doubtlessly equal to half of TikTok’s U.S. income—again to the Chinese language agency.

ByteDance doesn’t disclose its monetary outcomes and declined to remark for this text, however media studies peg its income at $155 billion, with virtually $40 billion of that coming from outdoors China. Estimates of ByteDance’s U.S. income hover round $15 billion. General, ByteDance reportedly earned $33 billion in income final 12 months.

ByteDance might funnel any cash from the sale of TikTok U.S. into sustaining its AI edge.

The corporate’s giant language fashions aren’t essentially probably the most highly effective in China’s AI ecosystem— that accolade normally goes to fashions launched by DeepSeek, Alibaba, or AI startups like Moonshot AI. “ByteDance’s energy isn’t in conventional textual content LLMs; it’s their picture and visible stuff,” Grace Shao, an analyst of China’s AI sector, factors out. The agency is integrating generative AI companies into TikTok and its video enhancing app CapCut, permitting customers to make use of the expertise for content material. (ByteDance researchers gained an Excellent Paper award in 2024 at NeurIPS, generally known as the “Olympics of AI,” for locating a technique to generate photos extra effectively.) 

Meaning ByteDance’s direct competitors isn’t simply DeepSeek or Alibaba, Shao says; it’s livestreaming large Kuaishou, whose Kling imageand video-generating companies have at occasions been the world’s greatest. 

To maintain its benefit within the AI race, ByteDance wants entry to highly effective AI chips. Media studies declare ByteDance is the most important purchaser of Nvidia chips inside China and that it has explored designing its personal processors. It’s additionally investing in knowledge facilities in areas like Latin America and Southeast Asia. 

All these initiatives add up. In January, Reuters reported that ByteDance had earmarked over $20 billion in capital expenditures for 2025. (The corporate known as the report “incorrect.”) ByteDance’s competitor, Alibaba, has pledged to spend over $50 billion towards AI over the subsequent three years. (U.S. capital expenditures dwarf even that, with Alphabet anticipating to spend as a lot as $93 billion in 2025 alone.) 

On the similar time, ByteDance is providing its mannequin at dirt-cheap costs to undercut rivals. Purchasers of ByteDance’s fundamental mannequin pay 2.6 yuan (37 cents) per million tokens. Entry to DeepSeek, however, prices about 42 cents per million tokens. 

And in contrast to its Massive Tech counterparts Alibaba and Tencent, ByteDance’s personal standing means it could’t faucet public markets for capital. The TikTok U.S. deal, if finalized, could have the ancillary good thing about unlocking ByteDance’s lengthy hoped for, and lengthy delayed, IPO.

ByteDance was gradual to hitch China’s AI race, however a good later entrant— DeepSeek—lit a hearth beneath all contenders in January when its mannequin, constructed by a tiny analysis lab and educated on far fewer assets, matched ChatGPT’s capabilities. 

“DeepSeek wasn’t only a wakeup name for the West, however actually a wake-up name for China as effectively,” says Shao. China’s Massive Tech had grown complacent “sitting on high of their hills—commerce, or social media, or no matter—and simply form of cruising.” 

Now, firms like Alibaba, Baidu, and Moonshot AI are upping their recreation, releasing extra highly effective fashions which might be usually open-source, enabling builders to experiment with the fashions themselves. 

No matter ByteDance decides to do with AI, it might happen beneath the radar, at the very least at first. “ByteDance is just not an organization that hypes themselves up rather a lot at first,” says Shao. “They actually wait till their merchandise are mature sufficient to launch.”

With AI reworking China’s tech sector, ByteDance wants cash and focus. Fixing the TikTok U.S. drawback might web them each.

This text appeared within the December 2025/January 2026: Asia challenge of Fortune with the headline “ByteDance with out Tiktok.”